In business school, we talked a lot about entrepreneurship and we adapted the idiom "ham and egging" to mean the way entrepreneurs need to ask for a whole lot from their early employees, vendors, and customers. Say you had your first signed customer, the "ham and egging" entrepreneur would take that contract immediately to the bank to ask for money, investors to ask for capital, or vendors to ask for credit. I can't find any real-world usage that mirrors this b-school usage. Ham and egging means, variously, someone with minimal talent, legs, baseball's double play, plugging away at a task, or begging. Maybe it was the begging usage we were adapting—the entrepreneur does a lot of asking. Whether our usage was right or not, the newly started company needs to bridge a big gap between what it wants to be and what it is. There are a lot of opportunities to fake it until you make it. That's where they get into trouble.
There are so many chance to bend the edges in the entrepreneurial asking. Maybe you don't have a signed customer contract, but you have a verbal commitment, so you take that to the bank, the investors, or the vendors. You're recruiting an employee and you're not quite sure what they'll be doing, so you paint an aspirational picture. Maybe the investors want higher returns than your model can generate, so you change the model on your current customers and employees. Maybe there's an important statistic, on which capital, future customers, and employees hang, and it's just a little malleable. I'd wager that most new companies face and make the less ethical choice on at least one edge case question like these. It's too easy not to. But when huge headline or huger investments ride on a new venture, they seem to make even more of the less than ethical choices—inflating customer counts, potential profits, or what their company's product can actually do.
The startup Lambda School has all of that and more: they seem to have hit the rare Theranos trifecta, duping customers, investors, and themselves. They made up employment figures for their graduates; they made up their curriculum and teaching model as it was happening; they concocted a buy now, pay later scheme that wasn't profitable, but powered growth. It pivoted and grew and pivoted again, successfully selling to investors a dream of disrupting college. Right until the end, every pivot seemed to mask the making up. It wasn't until the army of under-employed "graduates" on the hook for thousands in debt took to social media that the lies finally caught up with them. They moved fast and broke things.
Even if there's not ethical boundary crossing, startups can seem fishy. I remember meeting with Palantir's DC-based sales team in 2011 or 2012. They done a few data projects for campaigns and had a pitch for political groups. The pitch they gave us was a little more like the business model they used with large organizations (industrial, healthcare, etc.): they'd embed a few "forward-deployed engineers" in our organization; these people would hunt for data/tech problems; then they'd build some custom solutions for us. I couldn't quite figure out what I was buying. In the end, the pitch made it clear: I would be buying engineering time and then renting whatever solutions they built, Palantir would retain the rights to the solutions but wouldn't sell our data to anyone else. I didn't feel like paying for their work twice, so I passed. Clearly I missed the boat: this is now a 4,000 person company worth $100 billion. They moved fast, broke things, and made a real company.
What's the difference? Palantir is more like IBM and Lambda School is more like a strip mall diploma mill: the former makes money providing something valuable (if hard to describe), the latter makes money bilking people. Both tried to grow, but Lambda pursued the kind of growth the worst kind of vulture capitalists demand and breakneck speed. Palantir is over 20 years old, an eternity in the tech sector—it only went public in 2020, which meant that the primary payout for early investors took more than a decade. Building strong businesses takes time and it takes real leadership. It's probably the case that the sort of leadership required is contraindicated by the leader's Twitter presence.
Reading
Fast Crimes at Lambda School
Austen Allred co-founded Lambda School, one of the largest educational startups of all time. It promised to teach you to code in a matter of months, a common claim in 2017, a time when code bootcamps were commodities you could find in any strip mall. But you don't score $120 million in funding from the biggest names in venture capital by building a better boot camp. He took on college.
Reflections on Palantir
I left last year, but never wrote publicly about what I learned there. There’s also just a lot about the company people don’t understand. So this is my effort to explain some of that, as someone who worked there for eight years.
A Startup Founder To Scaleup CEO's Journey from $0 to $25billion
In my work as an investor with Sequoia and Propeller, many CEOs pick my brain about the journey from startup founder to scaleup CEO. It was a long strange trip, but one on which I learned a lot. Here’s a list of Halliganisms I picked up along the way that I hope will help some of you on that same journey.